Louisiana’s second-largest insurer has received permission to boost homeowners’ rates an average of 20.6 percent for nearly half its customers, while the remainder will see rates rise an average of 9 percent.
Hardest-hit will be customers in coastal areas at more than 50 percent.
Allstate has two major homeowners companies in Louisiana — Allstate Indemnity Co., with 96,117 customer, and Allstate Insurance Co., with roughly 105,915 policyholders.
Allstate Indemnity received the 20.6 percent increase from the Louisiana Insurance Rating Commission, which means its customers will see rates rise an average of $206. Allstate Insurance received the 9 percent increase, an average of $90.
However, Allstate regional counsel Lorrie Browse noted that the increases will vary by region. For example, 21 percent of Allstate Indemnity customers will see a decrease, she said. In the southern portion of the state, percentage increases will range from the single digits to around 52 percent. Meanwhile, customers in north Louisiana will see rate reductions of as much as 11.2 percent.
The commission approved Allstate’s rate requests by 3-1 margins. The lone opponent, commission member Steven Rock Ruiz, said eight months after Hurricane Katrina Allstate has paid only 80 percent of its claims while other insurers have paid 95 percent or more.
“I don’t know what to tell one of the biggest insurers in the state other than I think y’all have failed the people of Louisiana that you have insured,” Ruiz said. “You haven’t done a good job. I’m not going to vote for your filing. That’s the only authority I have.”
Browse said she respectfully disagreed. “Allstate’s claims closure rates are in the mid- to high-80s percentagewise, within the ballpark of other insurers.”
In addition, she said Allstate has paid more than $2 billion in homeowners claims, wiping out roughly 55 years of Louisiana-based profits in one year.
The Allstate companies’ rate filings included increases of 8 percent and 7.6 percent, respectively, to cover the cost of reinsurance, the insurance that companies buy to protect themselves. The company did not have reinsurance in Louisiana last year.
Allstate’s countrywide reinsurance cost around $295 million for 2006, company actuary Steven Armstrong said. Around $13.5 million of that will cover homeowners business in Louisiana.
Deputy Insurance Commissioner Chad Brown said reinsurance is an unregulated business. As a result, reinsurers can make huge increases in rates after a catastrophe to recoup their losses. Reinsurance rates have gone up roughly 300 percent, which means more homeowners companies are seeking large rate hikes, said Insurance Department spokeswoman Amy Whittington.
Armstrong said Allstate’s have also begun to see a 15 percent rate increase to cover the assessment for Louisiana Citizens Property Insurance Corp., the state-backed insurer of last resort. Citizens Property can levy assessments against the states other insurers to cover the gap between its revenues and claims. Insurers can pass those charges along to their customers.
In other action, the commission approved rate increases for:
Lafayette Insurance Co.’s homeowners line. The company received a 37.9 percent increase, which will generate $3 million from the company’s 11,006 policyholders.
Senior vice president Michael T. Wilkins said the company’s policies were woefully underpriced when compared to competitors.
Ruiz objected to the increase because the company has only settled 40 percent of its Katrina-related claims.
National Lloyds Insurance Co.’s low-value dwellings program requested a 25 percent increase, or $458,600, for its 4,789 customers. Insurance Department chief actuary Rich Piazza said the requested increase was too large and could not be statistically justified. He recommended an increase of 11.6 percent, which the commission approved.
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